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Formal Proceedings ‐ Constitutionality
U.S. Supreme
Alabama
Arkansas
California
Neblett v. Carpenter, 305 U.S. 297, (1938). The appellants argued that the
rehabilitation procedure under the California insurance code unconstitutionally
deprived policyholders of their property without due process of law or
impaired the obligation of their contracts. The appellants also argued that the
code unconstitutionally delegated legislative functions to the insurance
commissioner. The U.S. Supreme Court concluded that the latter was a
question of state law and the decision of the state's highest court bound the
Supreme Court on that matter.
Banks v. Debellis, No. CA 97‐1129‐P‐C, 1998 U.S. Dist. LEXIS 9632 (S.D. Ala.
April 24, 1998). Policyholder was not deprived of due process of law because
Alabama Department of Insurance sought rehabilitation of insurer,
notwithstanding that such petition may have delayed the collection of her
judgment.
Fewell v. Pickens, 344 Ark. 368, 39 S.W.3d 447 (2001). The Arkansas Insurance
Department agreed to a forbearance of receivership in exchange for deposits
and promissory notes by the parent company and individual owner to cure a
capital surplus deficiency, as well as consent to immediate commencement of
receivership proceedings, the entry of an order granting receivership, and
waiver of prior notice to the entry of such an order. Upon breach of the
agreement, the Insurance Commissioner filed a petition for appointment of
receiver and injunctive relief. The Arkansas Supreme court upheld the circuit
court’s findings of breach of the forbearance agreement. The court further held
that the statutory requirements of a show cause order and full hearing under §
23‐68‐104 of the Uniform Act did not control because the parent company and
individual owner had waived their rights under the statute, and that the
immediate entry of receivership order with permanent injunction did not violate
due process protections. The court also found that the receivership circuit court
had proper subject matter jurisdiction to issue an injunction because § 23‐68‐103
of the Uniform Act invests original jurisdiction over delinquency proceedings in
the Circuit Court of Pulaski County, and § 23‐68‐105 specifically endows the
circuit court with the authority to issue injunctions.
Caminetti v. Pacific Mutual Life Ins. Co. of California, 22 Cal. 2d 344, 139 P.2d
908 (1943), cert. denied, 32 U.S. 802. The plaintiffs contended that the
insurance commissioner's transfer of the stock of the insolvent insurer to five
persons named as voting trustees was invalid. The court concluded that the
commissioner's powers under the code were not an invalid delegation of
legislative power for lack of standards by which the commissioner was to be
guided in determining when to set up a voting trust. The court also concluded
that the section did not violate constitutional inhibitions against impairment of
contract and taking of property without due process if the voting trust
provided a reasonable means for promoting management continuity and
policy uniformity in the company. Lastly, the court concluded that this did not
constitute a legislative encroachment upon the powers of the judiciary.
Caminetti v. State Mutual Life Ins. Co., 52 Cal. App. 2d 321, 126 P.2d 165 (1942).
The commissioner's authority to act as a receiver of an insurer was found to be
constitutional.
Florida
Snyder v. Douglas, 647 So. 2d 275 (Fla. Dist. Ct. App. 1994). The Court upheld
the constitutionality of Florida’s statutory provision requiring a six month